Survey: Private Equity Managers Skeptical About ’09 Recovery

Jun 12 2009 | 11:42am ET

A fair number of hedge fund managers have indicated that they think the current market rally is a real recovery. Count their alternatives counterparts in the private equity industry a good deal more skeptical.

Make that a great deal: More than 90% of middle-market private equity fund managers believe that the credit crisis will last into next year, according to a new survey from Rothstein Kass. Despite that pessimism, most such p.e. firms hope to raise capital this year and plan to take a more active role in running their portfolio companies to combat the weak economy.

“In 2009, fundraising intent remains remarkably consistent, with over 90 percent of participants again suggesting that they are seeking more money to invest,” Tom Angell of Rothstein Kass said. “New investors are seen as more likely sources than existing clients, with direct and indirect investment from high-net-worth individuals outpacing institutional asset flows.”

Indeed, 83% of respondents expect new investors to jump into the market, though not to the exclusion of high net-worth investors, from whom 77% of those surveyed expect to see new money. By contrast, only 43% see institutional investors as a major source of new capital, another stark difference between p.e. firms and hedge funds.

And given their expectations of a prolonged period of economic weakness—Rothstein’s survey shows most p.e. managers don’t expect a recovery until the middle of next year—managers are looking for ways to improve the returns of their portfolio companies. Nearly four in five expect to have greater involvement there, up from 63% last year.

Certainly, investors are worried about p.e. returns: A second Rothstein Kass poll of ultra-high net-worth investors finds that just 24% are highly satisfied with their current p.e. investments.


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